TOKYO, July 11 (Reuters) - Toshiba Corp told its creditor banks it is in talks with Western Digital Corp and Taiwan's Foxconn over the $18 billion sale of its prized chip unit, banking sources familiar with the matter said on Tuesday.

Late last month, Toshiba picked a Japanese government-backed consortium as preferred bidder to buy the conglomerate's semiconductor business, but they have yet to reach an agreement.

The group includes the state-backed fund Innovation Network Corp of Japan, the Development Bank of Japan, U.S. private equity firm Bain Capital and South Korean chipmaker SK Hynix Inc .

Foxconn, the world's largest contract electronics maker, is formally known as Hon Hai Precision Industry.

A representative for Toshiba was not immediately available to comment.